US manufacturing activity picked up in October, supported by the strongest production growth in nearly five years.
The Institute for Supply Management’s manufacturing index rose one point to 55.5 in October, the second-highest reading in more than four years. The measure topped all but one forecast in a Bloomberg survey of economists. Figures above 50 indicate expansion.
The production gauge notched its best reading since late 2021, data out Monday showed. A measure of new orders, a sign of demand, was the highest since July and remained well within expansionary territory.
See more: Manufacturing Production Is Improving, Manufacturing Employment Is Not
ISM’s manufacturing gauge has now pointed to growth for 10 consecutive months, reversing a roughly three-year slump for the sector.
The sustained pickup has encouraged manufacturers to hire more workers. Factory headcount increased in October for a fourth month, the longest such stretch since early 2022.
Factories are benefiting from strong economic growth, resilient consumer demand and solid business investment. The US economy expanded in the third quarter at the fastest pace in a year, bolstered by business outlays on data centers and artificial intelligence, as well as industrial and other equipment.
Twelve industry groups reported growth in October, including electrical equipment, machinery and computer and electronic products. The three industries reporting contraction were printing, paper and nonmetallic minerals.
Select Industry Comments
“‘Negative, inflation, in the red’ are the three words or phrases that best describe our strategic sourcing for 2026... Despite the cost pressures, sales have been OK. It won’t be a great year.” — Chemical Products
“Global demand for capital scientific instrumentation assets has slowed due to continued uncertainty in the Middle East, Eastern Europe and China. Anticipation over the midterm elections and impact to funding for scientific research and the National Institutes of Health also is impacting customers’ purchasing behavior, making them focus on optimizing existing technology and tools.” — Computer & Electronic Products
“Economic policies coming out of Washington continue to weigh on business conditions. Customers are unwilling to make commitments to anything other than the shortest term due to the vast uncertainty. Canadian tariffs continue to damage small US businesses selling into that important market.” — Fabricated Metal Products
“Inflationary pressures and volatile commodity markets continue to create challenging scenarios and unfavorable impact to purchase price variance. Diesel rates and the trucker shortage are impacting costs beyond the raw material inputs to levels I have never seen.” — Food, Beverage & Tobacco Products
“Explosive growth in the semiconductor and government/defense spaces has put us on our heels as we try to work through demand. The long-awaited wave has arrived for our company, and it seems the global supply chain is in similar straits. Lead times and prices are increasing, and some carry Covid-19 era delays.” — Machinery
“Business remains strong, largely driven not only by data centers and mission critical infrastructure, but also the continued replacement of municipal infrastructures particularly related to water. Mining continues to be strong as well.” — Machinery
“Any commodity consumed by AI/data centers is in a crunch, both for supply and pricing. We keep wondering when the madness will stop.” — Miscellaneous Manufacturing
Manufacturers in recent years have also had to contend with high inflation and supply-chain disruptions amid tariffs and the Iran war. The Federal Reserve’s preferred measure of inflation rose 3.6% from a year earlier in September, well above the central bank’s 2% goal.
ISM’s report showed that factories in October once again faced elevated prices for raw materials and longer lead times on supplier deliveries. ISM’s prices gauge fell to 75.2, down from the prior month but still higher than before the Middle East conflict began.
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